Wednesday, July 29, 2009

Business Examiner Kelowna - Recession 2009 the Okanagan Impact

Recession 2009 the Okanagan Impact

Business Examiner – July 2009 - Craig Brown Publisher

A survey sent out to Okanagan businesses on the impact and duration of the current recession yielded a cautious optimism the part of a bare majority of businesses surveyed.

The first two questions asked if the recession had affected their business, and if they had lost business on account f it. Intuitively one might expect both answers to be nearly identical, but that is only partly correct.

The ‘4’ and ‘5’ answers, meaning a very strong effect was felt, is almost the same for both questions: just over 37% say the recession has strongly affected their business, and 35% say they lost quite a bit of business.

Peter Jeffrey of FormaShape in Kelowna has definitely felt the impact. The company produces water slides and what it calls its “architectural side”, which are the outside signs and design elements seen at gas stations. Sales are down.

He says it’s not all bad news. Faced with shrinking revenues, the recession “goaded us to bid on products in other places. “Right now they are looking at custom one-off products for the film industry. Jeffrey says, “That is a market we wouldn’t have dreamt of looking at before.”

The other end of the scales on those first two questions produced quite different results. A score of ‘1’ meaning there was virtually no effect on their business was given by only 12% of respondents, but 35% said they had lost no business because of the recession.

This suggests that while more than a third of the respondents have not lost sales or revenue, there are other impacts.

The Digital Art School says the recession has brought them more business. This makes sense as, in tougher times more people will go to school or upgrade their skills to enhance their chances of getting job.

Another business doing well in this recession is Donald Robichaud’s Floodlight Consulting. Most companies experiencing a strong downturn, he believes, got used to the good times of the boom economy and didn’t reinvest through marketing. “Those that are waiting for the phone to call are the ones suffering. The sales are there to be made and those that understand it takes longer to close leads know they need to have more leads and contacts.” Donald Robichaud says his business was up 18% in May over last year and expects 2009 to be up by 15% over 2008.

On the question of marketing and advertising 59% say they have not spent any more money this year. This result is hard to interpret. Companies with well developed marketing plans, as Donald Robichaud points out, may not need to increase their budgets. Others may be cutting expenses including advertising, to keep costs down.

Donald Robichaud also believes that the Okanagan is buffered somewhat by the large number of retirees still wanting to move here who will help to keep the economy going.
Responses to the question of employment suggest that business owners would seem to believe he is right. Less than a quarter of respondents (22%) say they have laid anyone off. Looking ahead 71% feel it is very unlikely they will be laying anyone off this year even though only a slim majority (56%), believe the worst of the recession is over. A nearly identical number (55%) believe their sales, if they declined, will recover as the year goes on.

Greg Salloum is the owner of the Best Western Inn in Kelowna. He is a nay sayer on the immediate prospects for the economy. He explains, “Two reasons that lead me to believe this are: How can the solution to our problems be also the cause of our problems? Cheap money. Second, there is another wave of mortgage renewals coming in the U.S. that is a bit larger than the last one that caused the recession to begin with. So, while I am generally still an optimist, I am being very cautious these days”.

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